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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Ei = (%dQd good X)/(%d Income)






2. The difference between total revenue and total explicit and implicit costs






3. The sum of consumer surplus and producer surplus






4. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






5. Exists if a producer can produce a good at lower opportunity cost than all other producers






6. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






7. Ed = (%dQd)/(%dP). Ignore negative sign






8. Two goods are consumer substitutes if they provide essentially the same utility to consumers






9. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






10. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






11. The additional cost incurred from the consumption of the next unit of a good or a service






12. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






13. The ability to set the price above the perfectly competitive level






14. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






15. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






16. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






17. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






18. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






19. The practice of selling essentially the same good to different groups of consumers at different prices






20. Es = (%dQs) / (%dPrice)






21. Entry of new firms shifts the cost curves for all firms downward






22. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






23. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






24. All firms maximize profit by producing where MR = MC






25. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






26. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






27. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






28. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






29. The lost net benefit to society caused by a movement away from the competitive market equilibrium






30. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






31. The total quantity - or total output of a good produced at each quantity of labor employed






32. The price of a good measured in units of currency






33. ATC = TC/Q = AFC + AVC






34. The difference between total revenue and total explicit costs






35. When firms focus their resources on production of goods for which they have comparative advantage






36. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






37. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






38. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






39. A firm that has market power in the factor market (a wage-setter)






40. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






41. The marginal utility from consumption of more and more of that item falls over time






42. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






43. The mechanism for combining production resources - with existing technology - into finished goods and services






44. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






45. The imbalance between limited productive resources and unlimited human wants






46. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






47. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






48. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






49. Entry of new firms shifts the cost curves for all firms upward






50. Product demand - productivity - prices of other resources - and complementary resources